China VAT: Rates, Fapiao and Filing Basics for Foreign Companies

Value-added tax affects more than the tax return of a foreign-invested company in China. It influences pricing, contracts, customer invoicing, supplier selection and cash flow. The VAT result cannot be determined from an invoice alone: finance must first understand the transaction, taxpayer status, applicable method and evidence behind the sale or purchase.

China's VAT Law took effect on January 1, 2026. This guide explains the current framework at an operating level. Preferential policies and local filing arrangements can change, so the company should confirm its actual tax registration and filing period before applying a rate or deadline.

TL;DR

• The common statutory VAT rates are 13%, 9% and 6%. A 3% levy rate applies under simplified calculation, while qualifying transactions may be zero-rated or exempt.
• A general VAT taxpayer normally offsets eligible input VAT against output VAT. A valid invoice is necessary in many cases, but it does not make every purchase creditable.
• Fapiao, contracts, delivery evidence, bank records and the VAT return should describe the same transaction.
• Invoice timing and customer payment terms need to be designed together because VAT can affect cash before the customer pays.

If VAT classification or fapiao issues are delaying billing or creating uncertain input credits, ask ChinaBizPro to review the monthly process.

Common VAT rates and treatments

The correct VAT treatment depends on the legal nature of the supply, not simply the wording preferred by a customer or accounting team.

Rate or treatment	Common application under the statutory framework	What to verify
13%	Many sales and imports of goods; specified processing, repair and replacement services	Product classification, import treatment and any specific exception.
9%	Specified goods and services, including transportation, postal, basic telecommunications, construction and immovable-property activities	Whether the supply fits the defined category and place-of-supply rules.
6%	Many services, financial services and sales of intangible assets not subject to another rate	The actual service, bundled elements and any cross-border treatment.
3% levy rate	Simplified calculation where the law and policy permit or require it	Taxpayer status, transaction eligibility and any current preferential policy.
Zero-rated or exempt	Qualifying exports and specified transactions	Evidence, filing procedure and the difference between zero-rating and exemption.

Zero-rating and exemption are not interchangeable. Zero-rating may allow a qualifying taxpayer to deal with related input VAT under the applicable refund or credit mechanism. Exemption generally means no output VAT is charged, while associated input VAT may not be creditable. A cross-border service is not automatically exempt merely because the customer is overseas; place of consumption, service type and documentation matter.

General taxpayers and simplified calculation

A general VAT taxpayer normally calculates output VAT on taxable sales and deducts eligible input VAT. The amount payable for a period is broadly output VAT less creditable input VAT, subject to the detailed rules and any carried-forward balance.

Simplified calculation applies a levy rate to the taxable amount without using the ordinary input-credit mechanism. Small-scale taxpayer status is a common setting, but simplified treatment can also depend on the transaction and current policy. A lower collection rate does not always mean a lower total cost: the ability to issue the invoice a B2B customer expects and the loss of input credits can affect pricing and competitiveness.

Taxpayer status should therefore be reviewed against expected revenue, customer profile, gross margin, procurement VAT and administrative capacity. It should not be selected only because the company is newly established.

Output VAT: connect the contract, tax point and fapiao

Output VAT starts with the actual supply. Before a contract is signed, sales and finance should agree on whether the quoted price includes VAT, the applicable treatment, which entity issues fapiao, when the invoice will be issued and whether the customer requires a particular invoice type.

The VAT tax point depends on the transaction and statutory timing rules. Receipt of payment, the contractual right to receive payment, delivery and invoice issuance can all be relevant. Issuing fapiao before the underlying payment or milestone may bring the transaction into an earlier reporting period. Finance should not let customer invoice requests override the tax analysis without checking the consequence.

Bundled transactions need attention. Hardware plus installation, software plus support, or rent plus services may contain elements with different VAT treatment. The contract price, invoice description and accounting allocation should follow a supportable classification rather than being changed after delivery.

Input VAT: an invoice is not the only condition

For a general taxpayer, eligible input VAT can reduce VAT payable, but finance should test at least four points:

1. The company is entitled to use the input-credit method.
2. The purchase is genuine and belongs to the company.
3. Valid VAT deduction evidence has been obtained and processed as required.
4. The purchase is used for an activity that permits credit and is not subject to a restriction.

Input VAT may be restricted where a purchase is connected with exempt or simplified-tax activities, collective welfare, personal consumption, abnormal losses or another non-creditable use under the rules. Mixed-use costs may require allocation. The exact category and evidence should be checked instead of relying on the supplier's assurance that its invoice is "deductible."

Imports create a separate evidence chain. Customs documents, import VAT payment, product classification, inventory receipt and the accounting record should reconcile. Overseas commercial invoices do not replace domestic VAT credit documents for an ordinary China purchase.

Fapiao control for sales and purchases

Fapiao is administered through China's tax system and has a broader compliance role than a typical commercial invoice. For an outgoing fapiao, check the legal seller and buyer, taxpayer information, description, amount, tax treatment and link to the actual delivery. Track fapiao that has been issued but remains unpaid.

For an incoming fapiao, match the seller, description, amount and tax to the contract, receipt or service evidence, approval and bank payment. A valid fapiao cannot turn a personal or fictitious cost into a company purchase. Corrections, red-letter invoices and cancellations should be handled through a documented finance workflow rather than informal messages between sales staff and the customer.

Filing periods and a monthly control routine

VAT filing periods and deadlines are determined under the law and the company's tax registration. Monthly filing is common for general taxpayers, while other taxpayers may have a different assigned period. Always use the company's electronic tax account and current tax-authority calendar as the operational source.

A reliable close routine has six steps:

1. Export the outgoing invoice and sales records for the period.
2. Reconcile revenue, invoice amounts, output VAT, collections and contract milestones.
3. Collect and validate incoming invoices and other deduction evidence.
4. Reconcile input VAT to purchases, expenses, fixed assets, imports and payments.
5. Identify exempt, zero-rated, simplified, cross-border and non-creditable items for separate review.
6. File, pay and archive the final return with the reconciliation and approval record.

Differences should be explained before filing. Repeated unexplained gaps between fapiao, revenue and bank movements are more difficult to resolve after several periods have closed.

For the wider relationship between VAT, CIT, payroll and cross-border payments, read the China tax overview for foreign companies. New entities should also connect VAT controls with the post-registration compliance checklist.

VAT cash-flow controls

VAT can become payable before a customer settles the invoice, while input VAT may be delayed because a supplier has not issued valid evidence. This timing gap is especially important for low-margin trading, long customer payment terms and project-based services.

Maintain a short VAT cash-flow schedule showing planned invoice dates, expected customer receipts, supplier invoices still missing, import VAT and carried-forward credits. Sales should know the cost of offering "fapiao first, payment later," and procurement should understand the cost of accepting a supplier that cannot issue the expected invoice.

Common mistakes

• Applying 6% to every service without checking the legal classification.
• Assuming an overseas customer automatically makes a service zero-rated or exempt.
• Quoting a tax-exclusive price while the contract and customer assume the amount includes VAT.
• Treating every incoming fapiao as creditable input VAT.
• Issuing fapiao before checking the contractual milestone and tax point.
• Filing from invoice-system totals without reconciling the ledger, bank and delivery records.
• Ignoring old input balances, red-letter invoices and issued-but-unpaid invoices.

FAQ

Is fapiao the same as VAT liability?

No. Fapiao is an important tax document, but VAT liability follows the law's taxable event and timing rules. Invoice issuance can affect timing, so the two must be reconciled rather than assumed to be identical.

Can a small-scale taxpayer credit input VAT?

Under the ordinary simplified method, it does not offset input VAT in the same way as a general taxpayer. The commercial effect of non-creditable purchase VAT should be included when comparing taxpayer status and pricing.

Does a valid special VAT invoice guarantee an input credit?

No. The taxpayer, transaction, use, invoice status and processing requirements must all support credit. A valid-looking invoice cannot overcome a non-creditable use or a transaction that did not occur.

How often should VAT be reconciled?

At least for every filing period, with key sales and purchase controls performed throughout the month. Waiting until filing day makes invoice corrections and missing-document follow-up much harder.

Official references

• State Council: VAT Law effective January 1, 2026
• State Council: VAT implementation regulation update
• State Taxation Administration filing guidance example for the 2026 VAT framework